Costs – Law Firm Management

Costs is the true “life blood” of a firm.  The marketing department will tell you it is their employees.

Then again, marketing departments tell more lies than claims management companies…

Fee Income

Everything comes down to Profit Costs.  Whenever you draft a N260 statement of costs or raise a fee invoice, you make the department’s partner happy. This is an inward smile however, so keep on fee earning!

The inclusion of Counsel fees, expert fees, court fees and other disbursements are a side issue. They do not contribute towards your office space, support staff, overheads, beer budget, VAT on WIP, etc.  These simply clear your debts with the people who tend to be on your side.  If you fail to pay these people, you will experience a proportionate downturn in free tickets, meals and Xmas bottles of whiskey (all within the Bribery Act guidelines of course).

How important is it?

If you have a really annoying lawyer in your office, with a number of personality defects, and you ask yourself “why have they not been sacked?”, please take a look at their billing records.  They are probably the best performer in your department.

Partners will overlook the most annoying employees if they bring in a lot of costs.

There are 2 vital things you need to know about how to become a successful lawyer:

(1) Bill lots of costs; and

(2) Don’t be professionally negligent.

You do not need to know anything more than that.

Bringing in costs

It is important to have the correct setup to be profitable. I cannot profess to knowing the best way to go about this, because it depends on your area of law. I only have civil experience, and therefore show the approach I have seen work successfully.

(1) Junior fee earners working on ‘low hanging fruit’. This is the basic stuff with a lifespan of 3-6 months. High volume and low margins.  This is important for getting the bills paid and breaking even. There is very little WIP locked up in these claims.

(2) NQ-2PQ level fee earners working on fast and low end multi track claims. The lifespan is generally 6-12 months for most of the claims. These help those with higher targets to bring in £100k+ each year. Some of the cases are higher value and will last a couple of years. If a person has a number of these a manager should supplement this with some low hanging fruit.

(3) 2-4PQ level fee earners allocated to £100k-£500k+ files. These involve more work on each file. The costs will be locked in for years, but when they are achieved it can result in a very high amount, and the fee earner achieving 2 years of costs in a single year.  These claims are quite difficult and some leeway needs to be given to the fee earners.

(4) The Big Boys – these are generally senior associates, associate partners and partners. They tend to have operational and management roles, combined with a small number of high value claims. The amount of WIP that accumulate on these is justified as once every couple of years they will see a massive return. These tend to end up in the SCCO due to the sheer number of zeros on the bill. Their salary is high and they do not live for the bonuses every year, because when their big fish lands every couple of years, they will get a bonus that more than covers the years when they go without.

Anything else to know about costs

Work with the best costs draftsmen in the market. The smaller outfits tend to be the best and it is worth putting up with them, even when they move at glacial speed.



2 thoughts on “Costs – Law Firm Management


  2. Or you could be very unethical and do what my old boss did and get your junior fee earners to do all the work even on the multi-track claims, and then put it in your partner’s name. This worked all very well, until a junior fee earner accidentally sent an offer out for £10,000 instead of £100,000 because the partner hadn’t even double checked it (EXPENSIVE TYPO!!!). Said junior fee earner got sacked. Partner didn’t sack himself also though. Funny that.

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